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| Colorful gold chains by Pomellato. Photo by Anthony DeMarco |
There were few bright spots in the global gold jewelry market for 2015 as regional tensions continue to slow jewelry sales.
Annual gold jewelry demand declined 3 percent in 2015, year-over-year, to 2,414.9 tons as many markets remain under the strain of geopolitical tensions and instability, according to the World Gold Council. Fourth quarter demand meanwhile was a bit more stable with a 1 percent drop in jewelry demand, year-over-year, to 671.4 tons. In value terms, the decline was 9 percent.
India, the second largest gold jewelry market in the world, was the main driver behind the gold jewelry economy this year, although it was not enough to offset losses in China, Turkey Russia, and the Middle East. In the U.S., steady, slow growth continues while spending on gold jewelry remains flat in Europe.
India
A surge in demand in India during the second-half of the year resulted in a 5 percent gain in demand in 2015 to 654.3 tons (its third highest level on record) and ended the year with a fourth quarter increase of 6 percent to 173.1 tons.
The WGC said November and December were “particularly upbeat” led by the five-day Diwali festival, which was preceded by a drop in the price of gold, leading to greater demand. Severe rains and flooding in southern India followed by reduction in foreign investment led to the first-half decline in demand.
China
Demand in the world’s largest jewelry market saw a 3 percent drop in gold jewelry demand, year-over-year to 783.5 tons. Meanwhile, fourth quarter demand fell by 1 percent to 202.6 tons. The WGC blames the “economic slowdown and the stock market turmoil of the first half of the year was the primary driver behind this weakness, through its damaging effect on wider consumer sentiment.”
The WGC adds the country faces difficult times for retailers as tightening credit lines and slowing economic growth has put pressure on margins. Small regional brands, especially those in tier 3 and 4 cities, have suffered most. Larger retailers have fared better, “supported by a better product range and deeper pockets.” About 85 percent of the market consists of 24k jewelry with higher-margin 18k product grabbing more market share. Inventories are being managed conservatively, the WGC adds.
Hong Kong
The small but important market saw its gold jewelry demand “practically collapse,” with a 23 percent drop in the fourth quarter alone to 13.6 tons. The island is heavily dependent on mainland China tourists, which saw a steep decline in 2015 and into 2016.
U.S.
Demand for gold jewelry increased 3 percent in the fourth quarter to 45.6 tons, matched by a “cautious” 3 percent increase in annual demand to 119.6 tons, the WGC said. The U.S. has now experienced eight consecutive quarters of growth. The main benefit was a drop in the gold price in the third quarter, which aided buying by retailers for the Christmas season.
“The tentative uptrend that began in 2013 continues to hold for now, but feels fragile,” the WGC said. “On the one hand, consumers have seen their disposable incomes benefit from lower oil and heating prices. But on the other hand, a shift has been seen towards spending on travel and leisure rather than on retail goods. While creeping improvement in economic indicators provides some support, there is little call for enthusiastic optimism in the outlook for 2016.”
Other Asian Markets
Overall, the smaller Asian markets were a “mixed bag,” the WGC said, with growth in Japan, Vietnam, Indonesia and South Korea offset by losses in Thailand, Malaysia, Taiwan, the WGC said.
Vietnam was the high point as demand for gold jewelry expanded by 31 percent year-over-year in the fourth quarter to 3.9 tons, yielding a 25 percent increase in annual demand to 15.6 tons. This is due to a steep drop in the local price of the precious metal in 2015, combined with lower inflation and stronger economic growth, the WGC said.
Turkey
The important gold jewelry manufacturing hub wrestled with economic, political and regional disruption over the past year and is seen by the WGC as one of the major causes of the global decline in gold jewelry demand in 2015. Fourth quarter results were very much along the lines of the year-over-year weakness seen over the preceding three quarters as demand fell 26 percent to 15 tons. The lira is weak, which kept local gold prices elevated. “The fragile domestic economic and political backdrop—and proximity to conflict in Middle Eastern countries—badly affected consumer sentiment in the market,” the WGC said. “As did the terrorist incidents that spilled onto domestic soil.”
Middle East
Iran is the only bright spot as demand in the region declined 5 percent to 51.4 tons in the fourth quarter, giving an annual total of 224.1 tons, the lowest since 2012. “Unsurprisingly, further falls in the price of oil and continued conflict across the region have fed through to declines in gold jewelry consumption,” WGC said. “Declining tourist revenues were an added factor in the UAE.”
Russia
Annual Russian jewelry demand slumped to a 14-year low of 41.1 tons—39 percent below the 2014 total. Demand in the market has “collapsed” since the middle of 2014, with six consecutive quarters of double-digit losses. “Already crippled by the after-effects of military intervention in the Ukraine (namely, a freefalling currency and international sanctions), the market has been further clobbered by plummeting oil revenues,” WGC said. “There is little room for improvement in demand over the coming year.”
Europe
Demand for gold jewelry in demand declined by 1 percent in both the fourth quarter and full-year of 2015 (to 35.7 tons and 75.8 tons respectively). Slight improvement in the UK (+1%) and Spain (+6%) were offset by declines in France (-5%), Germany (-2%) and Italy (-3%) continued to shrink.
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